Incentive problem with Ghash

[Birdy]

In a decentralized environment like Bitcoin the most important factor is the incentive for the participants. If you want to solve any problem, it's best to solve it that way.

I own a few Bitcoins, so I have an incentive to contribute something and collected the most interesting posts of the Ghash discussion.

So whats the problem with Ghash having over 51%?

I doubt they would do anything malicious as well. But that's not the point. The point is that Bitcoin is trustless, yet I have to trust them.

Why do people want to use Ghash instead of other pools?

[...]
Ghash.io remains the best pool, and  no other  pool comes close.

To have a real long-term solution there need to be other pools that offer the same or better benefits as ghash.io:

Very low fees
Share the transaction fee income between miners (some pools keep it to themselves, which is ridiculous)
Clear stats on your hashrate and income
Automatic payout, preferably split between shareholders
API support to check your hashrate from mobile or browser plugin
Reliablilty
Total pool hashing power (to decrease variance)
Merged mining (=free extra money) preferably with automatic cash out or even automatic exchange to bitcoin

GHash understands marketing and presentation. They also offer the most merge mined coins (BTC,IXC,DVC,NMC). Finally they tie in a hashrate trading platform (CEX.io) allowing anyone to get in/out of mining as they please. The people behind GHash are to mining as Mark Zuckerberg is to social networking. If there wasn't a 50% concern they would have over 90% of the pooled network by now I'm sure.

Slush's Pool was the first pool, now they have less than 5%. View Slush's page here, now view GHash.io. Any questions?

Ok, but why don't people switch to p2pool?

Well, there's a few downsides to using p2pool.

The first is inconsistency. If you have low hashing power, it may take you forever to even find a share. For example, mining on p2pool with an old 10 GH/s ASIC isn't very reliable.

The second is lack of tracking services. While some mining pools offer all sorts of worker statistics, p2pool can't really provide much due to shares being hard to find and it being decentralized. So you'll need to use another program to monitor your miners when away, instead of just logging onto the pool website.

The last is that it can be a bit more difficult to set up than a regular pool. You need to run a full node, which takes up a lot of bandwidth and about 20 GB(and growing) of storage. So if you have limited data, it may not be for you.

There are also advantages to using p2pool:

    helping decentralize the network

    Because there's no central operator, there's no risk of the pool getting hacked and your balance being lost

    No fees!

Why do they offer so much more than other pools?

[...]At no point in GHash's history have they halted registrations to prevent a 51% hash rate.  The only pool to ever do so was BTC Guild, and it did so at 45% of the network.  And the difference there was 100% of BTC Guild's hash rate was public, no private mining farm.  GHash.io continues to control a private mining farm of 40-50% of it's pool speed if not more, while trying to get more people to join their pool which has 0 economic sense behind it unless they plan on double spending or stealing from users (they're literally throwing money away to operate a public pool, spending time supporting people, and paying for servers, and gaining NOTHING from it).

I don't know if that's true, but how do they manage to upkeep their offer?
Maybe they just betting that mining isn't going to give back the full investment, so their share is the part they don't have to pay out.

Wouldn't miners change anyway, for the good of Bitcoin?

[...]such nebulous incentives don't work in reality. For example, endangering long-term viability of fish stock never stopped overfishing and destroying fisheries, because it requires agreement of everybody, and it takes one bad actor to for the pact to fall apart. It's very profitable to not follow the pact to not overfish (especially if everyone else is following it), so default equilibrium is "fish as much as you can". You simply can't trust your competitors to not take advantage of you. [...]

In theory, we as Bitcoin "shareholders" should have incentive to create a solution.

This would mean creating an offer on par with that of Ghash and avertising it, so miners would have an incentive to change.
Also it seems like better documentation / an easy step guide is needed:

p2pool documentation is horribly confusing, incomplete, unstructured and misleading, its causing misunderstandings, most people don't even get what it actually is and there is no place to go to read about it and understand it, all the websites of the public nodes are written for people who already have an intimate knowledge about the structure of the whole p2pool network and most websites trying to give a general overview also fail and are not targeted at the average miner either, they are written in a horribly convoluted unstructured style and after reading them you usually know less than before, even if you have an above average IQ.

Your posting above is yet another proof of that.

Documentation needs to improve.

Another solution might be a protocol change that changes the incentive.

(sry for putting out a 3rd thread about this, I hope the compilation is interesting enough)

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[solex]

Great summary. I am wondering whether Bitcointalk itself could help by:

Ceasing to display ads for mining pools which are over a certain threshold, like 20% of the network.

Funneled some of the ad revenue received from pools to support p2pool development, improve its website and generally make it a much better option for miners.

[Willisius]

You think my post is one of the most interesting on the subject? I'm honored.

[Hunterbunter]

There is another alternative: inform businesses about the benefits of adopting a "1% for decentralization" policy.

I made this tool at the request of such a business: http://blisterpool.com/p2pdonate. They wanted someone to make it easy to donate 1% of their weekly profits to decentralized mining. Their incentive is in protecting their existing assets, while miners can get exactly what they crave the most: greater ROI. We've tried getting the miners to switch for the sake of the blockchain, but with little success. They just don't care; ROI is king. Businesses are a different matter, though, where blockchain matters a hell of a lot more. Any bonus to p2pool payouts (with regular payments) will find a natural equilibrium between the number of businesses/hodlers who value their assets, and miners seeking ROI.

If enough businesses recognize the need for protecting the blockchain, it's now dead easy to increase p2pool's ROI. I've released the workhorse classes and script here: https://github.com/hunterbunter/p2pool-donation-tool, and I'll update that when I add an api. Other's are free to implement it however they wish. It obviously detracts from the trustless nature of p2pool a little, having to go through central donation tools, but that's the price of convenience. Open source means anyone can implement it, though, and less trust is needed (although not zero).

I don't think the p2pool developer has been very active on the project of late, so I don't know how likely the changes you suggest are. There's nothing stopping nodes from becoming hybrid pools, though, with a p2pool backend and a shiny front-end that does more than a basic node.

Regarding the p2pool things that need improvement:

low hash - this is a hard one, because if a pool decides to give them some sort of trickle pay, it's going to have to come from the other miners who are actually earning shares, reducing incentive for them. Maybe it won't take much, though, and the donation tool could be adapted to keep some portion to pay out small miners on pure hash power alone. I already do this on blisterpool, but I'm paying out bonus devcoins at the moment split by node hashpower (to test a new devcoin client), so I know it's possible...it's completely node-centric, though, without a fundamental shift in the way p2pool works (unlikely).

tracking services - this is also difficult, because p2pool only takes in a bitcoin address. If a miner is willing to use a different address for each miner, then a p2pool node could feasibly offer simple tracking services like email notifications for things such as sudden hash failure. It's all a lot of work I don't expect many p2pool operators to do, but maybe hybrid nodes could.

Regarding GHash's goodness:
most things can be covered with some work by a p2pool node operator, but in essence they will be creating their own hybrid node with special perks for mining on there. They'd have to get something out of it too, though, so expect some fees. GHash charge a withdraw fee of 0.001 or something, so it's far from free...more of a "user decides the % they pay" system.

I was thinking about what to do with blisterpool lately. I've been offering a 20% bonus payout (yeah, 20%!) on top of normal p2pool payments to get people to mine on my node (to test the unofficial devcoin client), but with little success. I've been paying out in devcoin, and while people seem initially interested, I think the time before payments arrive (3 days + p2pool's general variance) really turns people off. Selling the dvc at market is no big deal, and even if it is, I could just do it for them and offer btc bonuses instead...I'm thinking of doing that when I get some time, but it requires a proper login system which is a bunch of work.

One thing I've been thinking about (sorry if this is totally off topic, but it's relating to incentives), is making my node a 100% p2pool fee node, so I get all income from p2pool, then having the internal login system show balances and stats and whatever, with choice of what to be paid out in and when. I could still advertise it as a 0% fee pool even though it takes 100% p2pool fee, but that's the same as a regular pool getting all the blockchain reward in their own wallets, then dishing it out internally. P2Pool would then be a pure backend connection, and my node would be similar to a regular pool mining on the bitcoin network, except its mining on the p2pool blockchain. It moves the risk from the miner to the pool a little if it wants to do trickle payments, which should be more attractive to miners, but obviously p2pool bitcoin block variance is still a big problem without serious hashpower.

[xstr8guy]

Here it is in a nutshell... GHash is huge and P2pool is too small.

People want to mine where their variance is minimized especially when the hashrate is increasing so quickly. Too much time between blocks on a small pool can decimate your income before the next difficulty jump. It's the same with good but small pools like BitMinter and Slush.

I suggest to anyone switching from GHash, try the other Big 2... BTCGuild or Eligius. They're big enough to reduce variance but not too big so they're a threat to the network. While I like the concept of p2pool, it's a bit unreasonable to expect people to give up potential profit so they can support an ideal.

[Parazyd]

Here it is in a nutshell... GHash is huge and P2pool is too small.

People want to mine where their variance is minimized especially when the hashrate is increasing so quickly. Too much time between blocks on a small pool can decimate your income before the next difficulty jump. It's the same with good but small pools like BitMinter and Slush.

I suggest to anyone switching from GHash, try the other Big 2... BTCGuild or Eligius. They're big enough to reduce variance but not too big so they're a threat to the network. While I like the concept of p2pool, it's a bit unreasonable to expect people to give up potential profit so they can support an ideal.

Eligius also offers merged mining of Namecoin and takes 0% fees.

[taipo]

None of the large mining operations are going to want the haphazard payouts of any of the smaller pools no matter what features they offer, and as stated, they will not give a crap about ideals, all they would care about is adding more miners to their racks while writing off their tax, and swiping the BTC in the process, and the constant almost hourly blocks mined on ghash.

If that be true, how to you tackle that mindset, is it tackle-able?

[flound1129]

None of the large mining operations are going to want the haphazard payouts of any of the smaller pools no matter what features they offer, and as stated, they will not give a crap about ideals, all they would care about is adding more miners to their racks while writing off their tax, and swiping the BTC in the process, and the constant almost hourly blocks mined on ghash.

If that be true, how to you tackle that mindset, is it tackle-able?

Start with the fact that Bitcoin difficulty doesn't change every hour.  In fact it doesn't even change every week.  So finding 'hourly' blocks should not be anywhere near as important as people think it is.

People put far too high a premium on some nebulous thing called 'variance' and need to be educated on why other aspects of pools are more important.  Like, for example, do they actually payout their rewards properly?